Womp, womp: The U.S. loses ground in economic freedom, again

posted at 4:01 pm on January 10, 2013 by Erika Johnsen

The Wall Street Journal and the Heritage Foundation have released their annual Index of Economic Freedom for 2013, and bad news, friends: More top-down regulations, more federal intrusion, expanded deficit spending, and heightened rent-seeking are in fact not conditions conducive to economic freedom. Based on measures relating to the rule of law, limited government, regulatory efficiency, and open markets, the United States came in tenth place, following Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, and Denmark. The least-free countries were Venezuela, Zimbabwe, Cuba, and North Korea in dead last.

Registering a loss of economic freedom for the fifth consecutive year, the U.S. has recorded its lowest Index score since 2000. Dynamic entrepreneurial growth is stifled by ever-more-bloated government and a trend toward cronyism that erodes the rule of law. More than three years after the end of recession in June 2009, the U.S. continues to suffer from policy choices that have led to the slowest recovery in 70 years. Businesses remain in a holding pattern, and unemployment is close to 8 percent. Prospects for greater fiscal freedom are uncertain due to the scheduled expiration of previous cuts in income and payroll taxes and the imposition of new taxes associated with the 2010 health care law. …

Under Democratic President Barack Obama, the federal system of government, designed to reserve significant powers to the state and local levels, has been strained by the national government’s rapid expansion. Spending at the national level rose to over 25 percent of GDP in 2010, and gross public debt surpassed 100 percent of GDP in 2011.

“The global advance toward economic freedom has ground to a halt,” according to the editors of the 19th annual Index of Economic Freedom, released today by The Heritage Foundation and The Wall Street Journal.

The world average score of 59.6 was only one-tenth of a point above the 2012 average. Since reaching a global peak in 2008, the editors note, economic freedom has continued to stagnate. The overall trend for last year, however, was positive: Among the 177 countries ranked in the 2013 Index, scores improved for 91 countries and declined for 78.

Is the relationship between all of this exponential growth in bureaucracy and state spending, and the subsequent retraction from robust economic growth, really such a mystery for some people? In a nutshell, more economic freedom leads to more economic growth, a simple point George Will sums up perfectly:

By rescuing almost everyone from restoration of Clinton-era rates, liberals abandoned any pretense of paying for their program of ever-expanding entitlements.

Instead, they made trillion-dollar deficits their program. From 1950 to 2000, economic growth averaged 3.6%; since then it has averaged less than 2%.

Liberals think today’s correlation between the slow economic growth and rapid governmental growth — including under George W. Bush — is a coincidence. Conservatives do not.

But of course, we’ve just voted ourselves another term of more of the same piling-on of big-government spending and bureaucracy, and the global trend is following much the same pattern, so… anybody getting excited for more self-imposed stagnation?